Wharf REIC's First-Half Results Show Signs of Stabilizing

Wharf REIC’s first-half results showed signs of stabilization, with underlying net profit increasing by 3% against the same period last year to HKD 3.3 billion. Revenue from the core operation in investment properties edged 2% down from the same period last year as the operating environment remains challenging as borders remain closed. The decline in revenue was also attributable to the recognition of development property in the first half of last year. As expected, Harbour City performed well, with revenue edging higher by 1% against the same period last year, while Times Square struggled to a 15% decline in revenue. With Harbour City faring better than our expectation, we now assume rent to be flat on last year, compared with 5% decline previously. This is offset by a steeper decline in rents for both retail and offices at Times Square. For the full year, we assume Times Square’s retail rents to be HKD 110 per square foot per month and HKD 50 per square foot per month for office, representing year-on-year decline of nearly 20%. There is no change in our view that rents at Times Square won't recover to their previous peak.